Segregation of Duties (SoD) are a primary internal control intended to prevent or decrease the risk of errors or irregularities, identify problems, and ensure corrective action is taken. This is achieved by assuring no single individual has control over all phases of a business transaction.

There are four general categories of duties:

In an ideal system, different employees perform each of these four major functions. In other words, no one employee has control of two or more of these responsibilities. The more negotiable the asset, the greater the need for proper segregation of duties, most significantly when dealing with cash, negotiable checks, and inventories.

In certain business areas, SoDs are highly important. This is the case, for instance, in businesses where cash is handled, since cash, by its nature, does not leave a direct trail. Any department that accepts funds, has access to accounting records, or has control over any type of asset must be concerned with implementing SoDs.

Examples of incompatible duties include the following:

SoDs can be challenging to start in a small operation, as it is not always possible to allocate enough staff to properly segregate duties. In these cases, management might need to take a more active role to start separation of duties by checking the work done by others, or by using other mitigating controls to minimize risks.